Student Loan Consolidation Info

Grace Period Loans

Grace Period Consolidation Loans

For federal student loans, there is a “grace period” between the time that the borrower stops going to school (or graduates, or for some other reason doesn't attend school for at least half time) and the time that he or she is obligated to begin paying his or her loan. The grace period for most loans is typically about six months. However, other federal student loans vary: The Perkins loan allows a grace period of about nine months; the FISL loan allows a grace period of about twelve months, and the PLUS loan doesn't have a grace period at all. If you plan on consolidating your student loans, it is best to do it during your grace period, so your interest rates drop by 0.60%.

Another benefit of grace period loan consolidation is that the grace period provides you with a set period of time with which the borrower can find employment and get settled without having to worry about making loan payments. If you are currently in the process of repaying your federal student loan, the lender calculates the interest on the loan with the 91-Day T-bill rate and adds 2.3%. If you are still enrolled in school, your interest rate is calculated using the 91-Day T-Bill with an addition of 1.7%, which is significantly lower when considered within the lifespan of a consolidated loan.

Apply for grace period loan consolidation the minute you enter your grace period. It takes at least six weeks to process the application, so it's important to get started as soon as possible to get your lower in-school interest rate. Also, you will not be given another grace period if you allow it to pass after leaving school. You can, however, qualify for an extra grace period if you enroll in school at least half time again and file the correct deferment forms. Defer repayment of your consolidated loan until the very end of your grace period to increase your in school benefits.

Keep in mind that if you consolidate all of the federal student loans you have taken out, you will have no choice but to lose the grace period on your loans. This is because loans must immediately enter the repayment phase before consolidation. There will be no grace period!

Based on current rates for your federal student loans, a post-grace period loan can have an interest rate of almost 6% higher than grace period loans. So don't wait to consolidate!